There Is a Difference Between Who Is Legally Required to Send

question 6

Multiple Choice

There is a difference between who is legally required to send a tax payment to the government and who bears the burden of the tax.Which of the following would have the most impact on who bears the burden of an excise tax?

• A)Whether the tax is imposed by the federal government or a state government
• B)Whether the tax is based on the ability-to-pay principle or the benefits-received principle
• C)The motive for the tax.If the tax is designed to raise revenue, more of the burden will fall on firms.If the tax is designed to achieve a social objective (for example, to discourage smoking)more of the burden will fall on consumers.
• D)The elasticity of demand for the item that is taxed

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Definitions:

Voting Shares

Shares of a company's stock that grant the shareholder the right to vote on corporate matters.

Purchase

The acquisition of goods or services in exchange for money, contributing to a company's expenses.

Consolidated Retained Earnings

The accumulated net income of a corporation and its subsidiaries after dividends have been paid out to shareholders.

Gain or Loss

The financial result that occurs when the selling price of an asset differs from its purchase price, either as a profit or a deficit.